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23 December 2010

Am I missing something here?

[It is a] perennial mischief - using the tax code not simply to raise revenue efficiently (with minimal distortion of economic behavior) but to pamper pet causes, appease muscular interests and make social policy. Since 1986, the tax code has acquired more than 15,000 complications.

"Targeted" tax cuts are popular complexities because they serve a bossy government's agenda of behavior modification: You can keep more of your money if you do what Washington wants. The tax code, says Camp, "should not be a tool of industrial policy" or of "crony capitalism": "Politicians should not pick the industry of the day."

One of [Congressman] Camp's objections to the health-care law is its obvious design to cripple health savings accounts. With HSAs, an individual who buys high-deductible health insurance becomes eligible for tax-preferred savings out of which he or she pays routine health expenses. (No one expects auto insurance to pay for oil changes or new windshield wipers.) This gives consumers of health care an incentive to shop wisely for it. Camp says the health-care law will make HSAs less attractive because "a qualified plan will be defined by the government rather than the market." And government will make HSAs unnecessarily expensive by requiring them to have "all the bells and whistles."

Am I not right in thinking that these same HSAs are "behavior modification?" The government gives certain savings accounts generous tax breaks if those accounts are used for certain expenses, "giv[ing] consumers of health care an incentive to shop wisely" - is this not a very clear example of what the preceding paragraph was condemning as "bossy?"